The story of veritas 0804

Copyright M. Leslie 1

The Story of VeritasAnd Some Things I Learned…

[email protected]


A Brief History of Veritas

1982 $0 Startup as Tolerant Systems

1989 $0 “Restarted” from Tolerant Systems (12 employees) Established industry standard file and disk

management software Novel OEM business model

1990 $95K Renamed Veritas, ML as CEO


Parachuting in as New CEO – 2/90

The Standard VC transition plan 4:00 PM: VCs fire current CEO 4:30 PM: VC’s meet w/ management team 5:00 PM: VC’s + ML meet with management

team 5:05 PM: VC’s leave 5:10 PM: ML meets with management team,

announces we are changing our name


The new name…

Anything but “Tolerant” Company-wide contest My wife proposed…

… “Intolerant Software” Being more marketing aware, I proposed…

… “Belligerent Software” We gave the attorneys three to check out

…VERITAS was the “cheapest to defend” VERITAS means TRUTH in Latin, and also

decorates the Harvard University crest


A Brief History of Veritas 1993 $10 M

Initial Public Offering $16 million raised, market cap of $64 million post-money

1996 $36 M

1997 $121 M Acquired Open Vision -- Entered Backup / Recovery business

1998 $210 M

1999 $700 M Acquired Seagate Software -- Established leading position in

Windows NT market


A Brief History of Veritas

2000 $1.2 B F1000 company (5,500 employees)

2001 $1.5 B New CEO


$95K $1.5 Billion

12 employees 5,500

Startup Fortune 1000

--In 10 years


What do investors hate the most?

Re-starts “The last idea crashed and burned, so let’s sift

through the smoking debris and see what we can salvage”

Mergers of equal size companies “A collision of two garbage trucks”


Tolerant Systems

Start up in 1982 Fault tolerant computing Too many companies Tolerant System fails in late 1988

200 people 12 Changed company name to “Tolerant

Software”


Tolerant Software and theAT&T Deal

An opportunity to “rent space” in the AT&T UNIX monopoly Develop next generation file and disk technology AT&T agrees not to develop these strategic products Both companies market/sell, share revenue 50/50

Underwrite customer risk of Veritas as start-up - if failure: AT&T would get source code AT&T pick up support of customers

UNIX taking off as THE commercial workhorse


A New Business Model

Develop UNIX OS component technology

OEM distribution through systems companies (Sun, HP, etc)

Long term relationships (design-out could take 2+ years) = Very nervous customers


The First Vision

Become an OEM supplier of OS components to UNIX systems companies

Make UNIX more available and robust – suitable for commercial data center usage

Ride the UNIX wave into the ’90s, establish a strong strategic position

High IP content, high margin, but…

…Limited scale


1990 Strategy ~4 yrs

Establish new identity Tolerant Software Veritas

Develop FS/VM products Close AT&T deal Become de-facto industry standard

through broadest distribution Demonstrate profitability IPO


Setting the Culture

IP intensive company, knowledge-worker based employee population

Highly open communications We changed the question from “what should we tell them?” to “Is

there any good reason not to tell them?” Weekly meetings, accessible executives

Employee participation in key decisions 1991 3:1 reverse split 1996 merger with OpenVision

Articulated values generated from the “grass roots”


The First Four Years 1990 - 93

Closed, AND renegotiated AT&T agreement Completed 1.0 releases of products in 1991 Licensed our products to over 60 UNIX system

companies including all industry leaders – Sun, HP, Digital and IBM

Set up “annuity” revenue stream Became profitable in 1992, IPO in 1993


The IPO

Had our initial public offering on December 9, 1993 A “micro” IPO: $16 million raised, $64 million market cap

after the money My message to the employees:

Like a college graduation – marks the achievement, but… Commencement – the beginning of the next, new phase Future value will be far greater than current value

i.e., Microsoft, Cisco, etc. Keep focus on execution


The Next Vision -- 1994

Expand the scalability of the company Create reseller / end user products and

presence Leverage the strong industry standard

position through acquisition Initiate a Veritas Brand


1994 Strategy (~5 years)

> $100 million revenue run rate Develop additional OS technologies Product segmentation of existing products Develop integrated higher level products

Editions (Oracle Edition, MS Exchange Edition) Build direct and reseller channel capability Acquire backup technology

Use VERITAS OS technology for enduring competitive advantage

Platform build-out: Develop equally strong position in… (…Netware, …OS2, …NT).


The OpenVision Merger – 4/97 Both companies ~ $36 m / year, prior year

Veritas 180 people, OV 240 people Entered Backup business

~$20 million / yr Shed other lines of business

Huge distribution channel win OEM Global 2000 end user direct reseller/distributor

Established first “End-to-End storage management” company – changed the paradigm Used “franchised” OS components to leverage competitive

Backup/HSM apps Difficult integration w/ very different cultures 18% EPS, accretive on Veritas 1997 operating plan THIS WAS THE COMPANY MAKER


The Seagate Software (NSMG) Merger 5/99

Largest independent NT “enterprise” channel Each company ~ $200 million

Each company ~ 1000 employees

Veritas gained dominant backup and dominant NT channel position

Critical mass in the industry – clear leader Pioneered “virtual pooling” pro-forma for

“purchase transaction” style merger Seagate II – financial engineering transaction in

2000


Six Years Later… FY 2000 reached $1.2 billion in revenues

Which IS > $100 million!!! F1000 Company

Segmented products to light and full Successfully re-wrote ALL major agreements

Created very successful “editions” business, with focus on Oracle market, expanding to NT

Developed world class end user / reseller sales force Acquired FirstWatch product, high availability failover

Ended up with >75% of Sun HA installed base Entered and came to dominate backup market

1996 = $20 million (#6+) 2000 = ~ $660 million (33 X in 4 years), clear market leader with

40% share. Went from 1/3 Legato to 3 X Legato

Gained massive channel in NT space


And Some Things I Learned…


Software Is a Great Business

Making money in high-tech is all about getting paid for your IP The better (and more unique) the IP, the more

valuable In the hardware business the IP is embodied

and delivered in the form of a “machine” The business of making and shipping machines is

error prone, which can sap the profit from the business

In the software business you just deliver the IP – sometimes in the form of bits transmitted over the ether…

At the extreme, Veritas delivered a $1.50 CD in exchange for $20 million


The More Grandiose the Plan, the Less Likely to Succeed

Tolerant Systems, OpenVision, Go Computing, General Magic, WebVan were “grand plans”…

… and so many others But many of the great companies started out

with small goals, and became overnight successes…

…after many years Like HP, Dell, Apple, Oracle, Microsoft, eBay,

Yahoo (and of course, Veritas…)… and so few others

Mergers are Risky

Over 10 years we probably did 25 mergers / acquisitions

Three worked FirstWatch OpenVision Seagate

The rest quietly disappeared But this is OK – the few big winners pay many

times over for the rest (not unlike the VC business)


Merger Integration is Really Hard!!!

Our most success came when the merger integration was…

…LIFE OR DEATH!


The OpenVision Merger

The OpenVision Merger was the most difficult It involved the creation of a new exec team w/ 4 from

OV, 3 from Veritas It took a full year.

When it was over it was the most difficult thing I had ever done in business

Physically / Mentally / Spiritually Exhausted

It started with a key person meeting of Veritas folks, three weeks before signing

Key event was lunch with the EVP Sales immediately after the close

It ended at an offsite – one year laterCopyright M. Leslie 27

Each Merger is Different

OpenVision – creation of a new company, new team, new values, BEST of BOTH

Seagate – Total Takeove -- We fired ~ 22 of 25 senior execs

FirstWatch – Product team integrated into engineering, product sold through existing distribution (Cisco model)


See the Discontinuity - Bet the Farm!

Veritas from the beginning was a bet on UNIX becoming a dominant factor We figured we would find a way to leverage it in the

future

Discontinuity: Transition from Glass House IBM Mainframe to Unix Transition from “DP Manager” to “CIO” Transition from data processing to information

technology / internet

Of course, you have to see it before everyone else does!


It’s all About Great Strategy!No, It’s Only About Execution!

Strategy with no execution can end in disaster (early OV)

Execution without strategy is getting all the trains to run on time…

…but with no place to go Great companies need both!



Only Those Who Are Both Paranoid and Courageous Will Survive

You never know where and how the world might change

Great companies make transformational changes You may have to put your whole company at

risk in order to save it Microsoft, Oracle, Intel, HP, Cisco, Apple

You need the courage to stay the course in spite of great risk, great effort, and the many who tell you otherwise


There is Life after Death

In the course of events there WILL BE black days

…days so black that all you will see is despair

Dark days are “leadership opportunities”

When things are great, remind people that there will be dark days again


There is No Finish Line…

Building a great company is like building a cathedral those who start it hopefully will not see its

completion

Each accomplishment is a prelude to the next challenge

The IPO is not a “harvest”, simply one step on the long road


Values and Culture make it worthwhile

We spend more time “at work” than any other single activity in our life

The outcome of our efforts is not always predictable so the quality of the daily experience is important

Values and culture define the character of the company Values and culture permit us to do our work with

integrity, and to conduct business in a civilized and honest environment

Values and culture help the organization to recruit the best, the brightest, and the principled

Values and culture do NOT sap the competitive capability


One Final Thought…


If you want a friend…

…Buy a dog

ROXIE


The Story of VeritasAnd Some Things I Learned…

[email protected]